2. Rational Expectations

Transcription

1 Central European University, Budapest Department of Economics Macroeconomic Theory I 2005Fall Instructor: Julius Horvath horvathj@ceu.hu Office: International Relations and European Studies Department, Faculty Tower, Room 307 In this class we introduce some basic topics and methods of modern open economy macroeconomics. We cover a variety of topics. Asterisk denotes mandatory literature which is included into the reader. Grading: 5% Homework, 45% Final Exam. 1. Schools in Macroeconomics University Press, Chapter 1, Schools in Macroeconomics, pp *Blinder, Alan S., Keynes, Lucas, and the Scientific Progress, American Economic Review, 1988, Vol 77, No.2, pp Phelps, Edmund S., Seven Schools of Macroeconomic Thought, Clarendon Press, Oxford, here you find MP3 files; interviews with Maurice Obstfeld, George Akerloff, Hal Varian, Dan McFadden, and others. Snowdon, Brian, Howard Vane and Peter Wynarczyk, A Modern Guide to Macroeconomics. an Introduction to Comparative Schools of Thought, Edward Elgar, Rational Expectations University Press, Chapter 3, Rational Expectations and Economic Policy, pp *Minford, Patrick, Rational Expectations Macroeconomics, an Introductory Handbook, Blackwell 1992, Chapter 2, Solving Rational Expectations Models, pp Basic Macro Model of Closed Economy University Press, Aggregate Supply and Aggregate Demand Model pp *Romer, David, Advanced Macroeconomics, the McGraw-Hill Companies, 1996,Chapter 5.2, Review of the Textbook Keynesian Model of Aggregate Demand, pp Basic Macro Model of Open Economy *Romer, David, Advanced Macroeconomics, The McGraw-Hill Companies, 1996,Chapter 5.3. The Open Economy, pp *McCallum, Bennett T., International Monetary Economics, Oxford University Press, Chapter 5, A Basic Model: Building Blocks, pp *Mark, Nelson, International Macroeconomics and Finance; Theory and Econometric Methods, Blackwell Publishers, 2001,Chapter 3, the Monetary Model pp Application of Basic Macro Models *Dornbusch, Rudiger, Expectations and Exchange Rate Dynamics, Journal of Political Economy, 84, December, 1976pp

2 Krugman, Paul.: It s Baaack: Japan s Slump and the Return of the Liquidity Trap. Brookings Papers on Economic Activity, 1998(2). 6. Balance of Payments and Inter-temporal Trade: a Two-Region World Economy *Obstfeld Maurice and Kenneth Rogoff, Foundations of International Macroeconomics, the MIT Press, 1996,Chapter 1 Inter-temporal Trade and the Current Account Balance, pp *Obstfeld Maurice and Kenneth Rogoff, Foundations of International Macroeconomics, the MIT Press, 1996,Chapter 1, A Two-Region World Economy, pp Time Inconsistency *Walsh, Carl E., Monetary Theory and Policy, the MIT Press, Chapter 8 Discretionary Policy and Time Inconsistency, pp *Walsh, Carl E., Monetary Theory and Policy, the MIT Press, Chapter 8, Discretionary Policy and Time Inconsistency, Solutions to Inflation Bias, pp *Barro, Robert J., and David B. Gordon (1983):"Rules, Discretion, and Reputation in a Model of Monetary Policy," Journal of Monetary Economics, 12(1): Application of Time Inconsistency *Ghosh, Atish R., Anne-Marie Gulde and Holger C. Wolf, Exchange Rate Regimes: Choices and Consequences, The MIT Press, 2002,Chapter 3, pp Balance of Payments Crises, Models, Target Zones *Flood, Robert P. and Peter M. Garber, Collapsing Exchange Rate Regimes: Some Linear Examples, Journal of International Economics, 1984,pp *Obstfeld, Maurice, Logic of Currency Crises, 1994,Springer 1995,in Monetary and Fiscal Policy in an Integrated Europe, edited by Eichengreen, Frieden and von Hagen *Krugman, Paul, Target Zones and Exchange Rate Dynamics, Quarterly Journal of Economics, 56, 3, August 1991pp The Cagan Model of Hyperinflation *Obstfeld, Maurice and Kenneth Rogoff, Foundations of International Macroeconomics, Chapters 8.1 and 8.2. Nominal Exchange Rates in an Unstable Monetary Environment, pp *Sachs, J.: The Bolivian Hyperinflation and Stabilization, American Economic Review, Vol 77, No. 2, May The Instrument Choice Problem *Walsh, Carl E., Monetary Theory and Policy, MIT Press, Monetary-Policy Operating Procedures, Chapter 9, pp Theory of Monetary Unions *Mundell, Robert A., A Theory of Optimum Currency Areas, American Economic Review, 1961, *De Grauwe, Paul, Economics of the Monetary Union, Oxford University Press, Chapter 1, the Cost of the Common Currency, pp McCallum, Bennett T., Theoretical Issues Pertaining to Monetary Unions, National Bureau of Economic Research, Working Paper 7393,October 1999 Alesina, Alberto, and Robert Barro, Currency Unions, National Bureau of Economic Research, Working Paper 7927,September

3 Chinn M. and J. Frankel, Will the Euro Eventually Surpass the Dollar as Leading International Reserve Currency? 3

4 Central European University, Budapest Department of Economics Macroeconomic Theory I 2005Fall Reader 1. Heijdra, Ben J. and Frederick van der Ploeg, The Foundations of Modern Macroeconomics, Oxford University Press, Chapter 1, Schools in Macroeconomics, pp Blinder, Alan S., Keynes, Lucas, and the Scientific Progress, American Economic Review, 1988,Vol 77, No.2, pp Heijdra, Ben J. and Frederick van der Ploeg, The Foundations of Modern Macroeconomics, Oxford University Press, Chapter 3, Rational Expectations and Economic Policy, pp Minford, Patrick, Rational Expectations Macroeconomics, an Introductory Handbook, Blackwell 1992,Chapter 2, Solving Rational Expectations Models, pp Heijdra, Ben J. and Frederick van der Ploeg, The Foundations of Modern Macroeconomics, Oxford University Press, Aggregate Supply and Aggregate Demand Model pp Romer, David, Advanced Macroeconomics, the McGraw-Hill Companies, 1996,Chapter 5.2, Review of the Textbook Keynesian Model of Aggregate Demand, pp Romer, David, Advanced Macroeconomics, The McGraw-Hill Companies, 1996,Chapter 5.3. The Open Economy, pp McCallum, Bennett T., International Monetary Economics, Oxford University Press, Chapter 5, A Basic Model: Building Blocks, pp Mark, Nelson, International Macroeconomics and Finance; Theory and Econometric Methods, Blackwell Publishers, 2001,Chapter 3, the Monetary Model pp Dornbusch, Rudiger, Expectations and Exchange Rate Dynamics, Journal of Political Economy, 84, December, 1976pp Obstfeld Maurice and Kenneth Rogoff, Foundations of International Macroeconomics, the MIT Press, 1996,Chapter 1 Inter-temporal Trade and the Current Account Balance, pp Obstfeld Maurice and Kenneth Rogoff, Foundations of International Macroeconomics, the MIT Press, 1996,Chapter 1, A Two-Region World Economy, pp Walsh, Carl E., Monetary Theory and Policy, the MIT Press, Chapter 8 Discretionary Policy and Time Inconsistency, pp Walsh, Carl E., Monetary Theory and Policy, the MIT Press, Chapter 8, Discretionary Policy and Time Inconsistency, Solutions to Inflation Bias, pp Barro, Robert J., and David B. Gordon (1983):"Rules, Discretion, and Reputation in a Model of Monetary Policy," Journal of Monetary Economics, 12(1): Ghosh, Atish R., Anne-Marie Gulde and Holger C. Wolf, Exchange Rate Regimes: Choices and Consequences, The MIT Press, 2002,Chapter 3, pp Flood, Robert P. and Peter M. Garber, Collapsing Exchange Rate Regimes: Some Linear Examples, Journal of International Economics, 1984,pp Obstfeld, Maurice, Logic of Currency Crises, 1994,in Monetary and Fiscal Policy in an Integrated Europe, edited by Eichengreen, Frieden and von Hagen, Springer Krugman, Paul, Target Zones and Exchange Rate Dynamics, Quarterly Journal of Economics, 56, 3, August 1991pp Obstfeld, Maurice and Kenneth Rogoff, Foundations of International Macroeconomics, Chapters 8.1 and 8.2; Nominal Exchange Rates in an Unstable Monetary Environment, pp Sachs, J.: The Bolivian Hyperinflation and Stabilization, American Economic Review, Vol 77, No. 2, May Walsh, Carl E., Monetary Theory and Policy, MIT Press, Chapter 9, Monetary-Policy Operating Procedures, pp Mundell, Robert A., A Theory of Optimum Currency Areas, American Economic Review, 1961,

5 24. De Grauwe, Paul, Economics of the Monetary Union, Oxford University Press, Chapter 1, the Cost of the Common Currency, pp